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What does an influx of big tech firms mean for the UK startup scene?

“With big companies like moving into specifically East London, what does this mean for the already established Startup Community? How can the two work together to create and innovate, and what are the benefits of this budding relationship?”

What do big companies mean for London? This was one question four individuals set out to answer at Internet Week Europe yesterday.

Carlos Espinal, Manager/Partner of Seedcamp; Sherry Coutu, VC/Angel Investor; Matt Elek, Publisher of Vice Magazine UK and Rebecca Quinn, Director EU Strategy and Operations at Wildfire Interactive all took to the stage on Monday afternoon for a live panel discussion at Internet Week Europe’s HQ in The Hospital Club.

A year on from David Cameron’s proclamation that he would transform East London into ‘Tech City’, a technological hub to rival Silicon Valley, it’s worth taking a look beyond the role startups will play in the cluster to see what role bigger companies can play in the area. Google recently announced a new base in East London, whilst other big tech firms are also hovering around the city, with the likes of Facebook recently procuring an office in the Covent Garden area.

Two worlds collide: Feeding the ecosystem

So what can the coming together of big and small companies achieve for the UK tech scene? “The bigger the network, the bigger collision of ideas can occur”, started Espinal. “Having the larger players come in with a lot of their APIs forming the backbone of the Internet, it provides a way for the startup communities to have closer access to the engineers that are actually making stuff. It also helps out with social events whereby ideas can be shared, and there’s closer and faster exchanges of ideas. Just from a creativity perspective alone, having big companies in the scene will help supplement what’s already going on there.”

Quinn chipped in that what the UK government is trying to do is create an ecosystem. “I think both components – big and small companies – are essential to that ecosystem”, she says. “Bringing big companies into East London means you’re introducing a certain level of expertise in development, product management and such like, but you’re also introducing funding. The big firms know that they need access to the fast-moving startups, and thanks to corporate investment funds they can play a much bigger role in the system.”

Elek added that there’s always this interchange at play with having a ‘scene’ with small and big companies at the heart, where the big companies can access younger, ‘hungrier’ talent, but at the same time the startups may inherently be more appealing places to work. “The bigger companies will often offer a lot of security, and perhaps bigger salaries, but they also offer environments that aren’t particularly appealing”, says Elek. “In a young startup you may not get paid quite as much, but there aren’t the restrictions, the rules, and the ‘boring-ness’ of working in a big company.”

“There’s a lot more innovation going on in smaller companies”, says Coutu. “They use very clever technologies in new ways. But I think the one thing big companies can do for little companies which is good for the ecosystem is to do with contracts. If larger companies contract with smaller companies then that is worth ten-fold than what a loan might get them from a bank. Also, these big companies – they need contracts, and if they can get them from a small company that is dead keen for the business and the technology is fantastic, then that’s a win-win for both companies and, hence, the ecosystem.”

Knowledge transfer

So at what point does the whole knowledge-transfer process actually happen? Back in September, The Next Webreported on Seedcamp’s plans for the future, Seedcamp being the European seed investment and mentoring program that Carlos Espinal is part of. The programme also involves an “Expert In Residence Program” that will seek to connect Seedcamp startups with Advisors from big companies, helping to foster a mutually-beneficial relationships that gives startups access to expertise and skills, whilst big companies can keep their fingers on the innovation pulse.

“Seedcamp is very specific to companies that are already somewhat formed, they already have something that they’re showcasing”, says Espinal. “But the general, broader question about the setting in which young companies can learn from the experts can be answered by looking at some of the places around London, such as Skills Matter, The General Assembly, and all these other new spaces opening up which help create more venues in which to hold events. It’s not that we were lacking such places before, but it’s supplemental – it’s a case of the more you have of such places, the less people have to fly in from Silicon Valley. They’re right there already, you can stop by and have a coffee whenever.”

“I think that’s one of the great things about being in London in general”, continued Quinn. “London naturally becomes a hub for discussion, you have so many great universities here, undergraduate and graduate programmes bring people together from all over the world. When you look at that combined with the recent focus from government on Tech City, and a decent hub of venture capitalists in the city, you get this…a hub of ideation. It’s not just around boardroom tables, it’s literally in the bars and pubs, as we see with things like the Silicon Drinkabout. It gives big companies a place to go and have a conversation if they want one, over a beer.”

Indeed, this is an interesting point – with the burgeoning tech scene in East London and elsewhere across the city, there becomes a rich, fertile environment for ideas to rebound of each other and flourish. “When we first moved to Shoreditch in 2002, it was really just a scene starting out”, says Elek. “What we found over the next decade was all our best sales were done in the pubs around that area. As an individual starting out in the media when you’re 21/22, you make these friends in the pub and what you find is ten years on a lot of these people you were drinking with a couple of years ago are now working at Google and other big tech firms. So there’s this colloquial, informal culture that has grown organically.”

This is a key element which, perhaps, shouldn’t be underestimated and was one that Coutu was in agreement with. “If I look at most of the companies I’ve invested in, and certainly the companies I started myself, I did it with mates who I drank with or went to school/university with”, she says. “It’s the people that you meet and get to know informally. And when there’s lots of venues for bringing people together, you’ll find that more things will happen.”

A combination of bigger tech companies getting involved in the local tech scene, and more avenues for these relationships to develop organically, it would seem, is what could really take the UK tech scene to the next level. It’s all part of a healthy ecosystem, with big businesses, little businesses and students all working within the same space.

Property prices

With David Cameron’s emphasis on trying to get more and more companies to cluster around the East London area, a natural extension of this drive will likely mean that property prices will go up – the reason why the Shoreditch area emerged as such a popular area for startups in the first place was because of the lower costs. With companies such as Google negotiating on office space in the area, it likely will encourage property-owners to consider upping the rental rates – but how much of a problem is that? “It’ll still be cheaper than SoHo”, says Elek. Whilst Coutu doesn’t envisage it being a problem either. “If it does get overly expensive in East London, then the scene will simply shift elsewhere”, she says. “London’s good to commute around.”

And this perhaps is a good point to finish on. London has a really good transport infrastructure, so how important is it that all the big and small tech companies are touching elbows? An intimate cluster would be nice, but if you’re a 10-minute ride away on the Northern line, it’s not the end of the world.